India has signed its biggest defence deal with the United States to procure ten C-17 heavy-lift aircraft for $4.1 billion under which American defence major Boeing will set up test facilities for hi-tech aeronautics engines for the Defence Research and Development Organisation.
The project to procure the ten strategic heavy-lift aircraft was cleared by the Cabinet Committee on Security last week through the Foreign Military Sales route.
"India on Tuesday signed the letter for offer and acceptance with the US for 10 C-17s and associated equipment at a cost of $ 4.1 billion and the aircraft delivery would be done in 2013 and 2014," defence ministry officials said.
Commenting on the development, Boeing's India head Dinesh Keskar said, "With its strategic capabilities, the C-17 fulfills India's needs for military and humanitarian airlift. The important transaction reaffirms our close relationship of several decades with India and also highlights our commitment to the strategic partnership between the two countries."
As per the agreement, the US defence major will invest 30 per cent of the contract amount for setting up defence facilities in India, officials said.
The procurement involves offsets clause, under which a vendor bagging a defence deal worth over Rs 300 crore has to reinvest at least 30 per cent of the deal amount in Indian
defence, homeland security or civilian aerospace sectors.
Under the offsets, Boeing will establish a High Altitude Engine Test Facility at DRDO, which will allow the research organisation to test engines indigenously, officials said.
Boeing will also set up a Trisonic Test Tunnel facility at the DRDO to enable testing, research and development of various aircraft.
Prior to this, the biggest deal with the US was worth $2.1 billion for procurement of eight P-8I maritime surveillance and anti-submarine warfare aircraft from Boeing through direct commercial sales in 2009.
Boeing, along with another US company Lockheed Martin, had recently failed to qualify in a bid for procurement of 126 Medium Multi-Role Combat Aircraft for the Indian Air Force.
The IAF has also procured six C-130J Hercules aircraft from the US under a $1 billion deal in 2007 and the first of the six aircraft joined the IAF in February.
India and the US have signed defence deals worth over $ 8 billion in the recent past and the figure is likely to go up in the next few years as several major deals are in the pipeline.